Learn About S6543


A Legislative Attack on HDFCs


Introduced in the NY State Senate June 1, 2017 at Mayor de Blasio's request.

WHAT IS IT?
Sweeping amendment of Article XI of NY State's Private Housing Finance Law under which all HDFCs are incorporated. Allows the City of New York to legally assume total control of all HDFCs.

WHO DOES IT AFFECT?
Affects all HDFCs, regardless of their tax status (with/without DAMP), their certificate of incorporation (whether incorporated under the Business Corporation Law or the Not-for-Profit Corporation Law), or any other specific characteristics.

WHAT POWERS DOES IT GIVE THE CITY OF NY:
—City will be able to micro-manage all aspects of HDFCs, for example:

  • set rent levels
  • decide not just who can lease, but even who can occupy an empty apartment
  • set apartment sale price caps (must be "affordable to families/persons of low income", as defined by City)
  • prior approval in writing for all apartment sales, as well as all share transfers or assignments.
  • prior approval of all leases (except for 1 single apt. or 1 commercial unit per building for a maximum of 2 years).
  • —City will be able to impose stiff penalties for any violations, including removal of HDFC directors and officers and replacement by City-appointees.
    —City will be able to retroactively redefine corporate status of all HDFCs:
  • All HDFCs incorporated under Not-For-Profit Corp. Law will be "deemed charitable corporations"-which is much more restrictive.
  • All HDFCs incorporated under the Business Corporation Law will be essentially treated as Not-For-Profit Corporations. [THIS IS A HUGE CHANGE. NFP IS WAY MORE RESTRICTIVE]. Business Judgment Rule is voided. Principle of equal treatment of shareholder is voided. Example: City can impose different charges, fees, assessments and requirements to different shareholders in same building-including different sale price cap levels.
    Destroying equality among shareholders destroys trust, sense of community, ability to live and run well an HDFC.
  • Retroactively amend all existing HDFC Certificates of Incorporation to add the word "operate", to specify that the HDFC is organized both to develop and to operate low-income housing. ["Original intent" and "perpetuity" fallacies. See under Reasons below].

    RELATION WITH REGULATORY AGREEMENTS

  • S6543 is intended to be the state's legislative enabler of the Regulatory Agreements.
  • The NY State Attorney General is dragged in as enforcer.
  • But S6543 is more comprehensive than the RAs. It also goes beyond HDFCs with DAMP, to affect all HDFCs.
  • REASONS FOR CHANGES GIVEN BY MAYOR DE BLASIO (in his Sponsor Memo):

  • False narrative (greediness, etc.)
  • "Intent of original drafters of Article XI" [false]
  • HDFC's were designed to exist "in perpetuity" [false; unsustainable].